When house prices in the UK fell in July 2021 after several consecutive months of growth, many people assumed that the raging property market had finally calmed down. Last month, however, house prices staged a surprise surge. They posted their second-biggest monthly rise in 15 years (2.1%), according to Nationwide.
There are several factors that could have contributed to August’s unexpected house price upturn. However, according to Nationwide, the top one was the stamp duty relief on properties worth up to £250,000.
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How did the stamp duty holiday affect house prices in August?
The stamp duty holiday instituted last year to bolster a faltering property market entered a transitional period on 1 July. The 0% stamp duty threshold was reduced from £500,000 to £250,000. This reduced threshold will remain in place until 30 September. After that, the threshold will revert to the pre-pandemic standard of £125,000.
So, while houses priced above £250,000 aren’t eligible for stamp duty relief, those priced below this threshold still are.
According to Nationwide’s chief economist, Robert Gardner, the house price growth witnessed in August stems from strong demand from those buying a property valued between £125,000 and £250,000 who are looking to capitalise on the tax relief in place until the end of September.
What else contributed to the rise in prices in August?
Apart from the stamp duty holiday, insufficient housing supply could have also led to the rise in house prices. According to Nationwide, estate agents are still reporting low numbers of properties on their books.
What can we expect with house prices going forward?
Many experts predict that current house price trends will continue for the foreseeable future.
Though the high growth figures witnessed over the last year might not be maintained, experts don’t expect a dramatic drop in prices once the stamp duty relief expires or even in the event of increased unemployment once the furlough scheme ends.
According to analysts, recent shifts in housing preferences combined with other factors such as ultra-low mortgage rates and increased household savings during lockdown will continue to support housing activity in the short term.
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Is now a good time to buy a house?
The surprise upturn in house prices in August teaches us a valuable lesson. Trying to time the market or waiting for the perfect conditions to make a purchase isn’t always a good idea.
When it comes to purchasing a home, the biggest factors to consider should be your needs and your financial situation.
If your dream home is available, you can afford it, and you intend to live there for a long time, it may be safer to take the plunge now rather than waiting for houses prices to fall. After all, there is no guarantee that they will.
Can I get help?
If you are working hard to build a deposit for your house, the government has several programmes to help you make your dream of homeownership a reality.
For example, you can apply for the Help to Buy: Equity Loan scheme. Under this scheme, you only need to raise a 5% deposit. The government then lends you up to 20% (or up to 40% in London) of the property’s total value.
There is also the Lifetime ISA, which is available via investing solutions providers like Nutmeg. With this type of ISA, you can save up to £4,000 each year and receive a 25% free top-up from the government to use towards the purchase of your home.
